After a couple of years in which the hype in the cannabis industry has been real, prospects for this new decade are starting to be more realistic. “Cannabis companies have been living on shareholders’ money,” says John de Vreugd with Altisol. “Thing is, results are not as expected. Everyone thought they found the pot of gold at the end of the rainbow, thus they started pouring money without really taking into consideration many of the elements that factor in in such businesses.”
A sign that the hype has been going down is the different companies’ stocks, which went from growing significantly to going down at a concerning pace, according to John. “This was especially clear after many companies released their financial reports, recording substantial losses, to say the least.”
Short on shareholders money
John continues to explain that companies have been struggling because they found themselves short on shareholders money. “When you don’t have money from shareholders, you have to produce and you have to get any revenue, just like a normal business. There are some of these companies in Canada that are generating revenue. But all the rest are not performing particularly brilliantly: for instance, there is a large Canadian LP that operates a 10 hectare greenhouse and it’s costing them almost 2 billion including the plants. Needless to say, it is impossible to get revenue from anything like that. Everybody knows that, except for investors, who are now demanding some profits.”
Thus, John believes that the bubble is about to burst. “You need to earn money, but that is rather impossible if you don’t have enough money to build what you want. What I found very ironic is the fact that many tomato greenhouses in Canada were re-adapted for cannabis cultivation, and as of now, tomato growers are the ones earning a lot of money as there is a very high demand for tomatoes.”
That is why John thinks that way fewer greenhouses will be built in 2020. “The lack of money will result in way fewer facilities to be built, and many greenhouses that started to be built last year, will be put on hold waiting for some money to invest in them,” says he. “However, this does not mean that the industry is doomed. There are always places around the world where growers build greenhouses, with Russia and China to be the most promising for the years to come.”
Slowing down
The main problem of this slowdown is the too easy time growers and greenhouse builders had in the past two years, according to John. “The hype around cannabis made everything extremely easy, maybe too much,” he points out. “In the coming time, with expenses adding up and less backup from investors, growers will build way less, as they are concerned about everything that comes with operating a cannabis facility.”
John has been in the greenhouse industry since the 1980s, and this is not the first time he sees such a situation happening. “Every now and then, there is always a hype that at one point will go down – and this is happening with cannabis, now. Consequentially, the market for greenhouses will be difficult, and I expect prices to go down significantly.”
According to John, the pressure on the market will be much bigger than in previous years. “Yet, people can thrive if they find their own ways. There is always enough work, but it will be less compared to the last two years.”
For more information:
Altisol
John de Vreugd
[email protected]
altisol.nl